The stock market closed the first trading day of 2023 in a downbeat tone as last year’s selling pressures poured over. Red-hot inflation and rising interest rates hammered equities last year, with the benchmark S&P 500 index tumbling 19% and the tech-heavy Nasdaq plummeting 33%.

Strategists are warning that many of the headwinds that plagued markets in 2022, like inflation, continued monetary tightening by the Federal Reserve, and the risk of a hard landing as further rate hikes permeate the U.S. economy, will persist into the new year.

Dave Grecsek, managing director of investment strategy and research at Aspiriant, said, “It’s a new year, but we’re stuck with the same macro conditions, which are still pretty discouraging.”

However, the upcoming minutes of the Fed’s December meeting could offer investors some insight into whether it’ll look to press ahead with its rate hikes or ease up.

While we think investors could consider buying quality ETF JPMorgan Ultra-Short Income ETF (JPST) this week, ETF ARK Innovation ETF (ARKK) might be best avoided now, considering the current macro environment.

ETF to Buy:

JPMorgan Ultra-Short Income ETF (JPST)

JPST is an actively managed, ultra-short-term, broad-market bond fund that aims to maximize income and preserve capital. The fund makes investments in fixed-rate, variable-rate, and floating-rate debt, including corporate issues, asset-backed securities, and debt pertaining to mortgages, as well as U.S. government and agency debt, including treasury securities.

JPST has $23.84 billion in assets under management. The fund has a total of 456 holdings that include the U.S. Dollar with a 52.04% weight, fixed income (unclassified) at 0.99% weight, BNP Paribas S.A. 3.5% 01-MAR-2023 at 0.90% weight, and New York Life Global Funding 3.855% 26-AUG-2024 at 0.75% weight of the fund.

JPST has an expense ratio of 0.18%, lower than the category average of 0.60%. Its fund inflows came in at $3.92 billion over the past six months and $5.53 billion over the past year. It has a NAV of $50.11 as of January 3, 2023.

The ETF pays an annual dividend of $1.49, which yields 2.97% on the current price. Its dividend payouts have increased at a CAGR of 25.6% over the past five years.

Over the past six months, JPST has gained 0.2% to close the last trading session at $50.12. Also, it has a beta of 0.04, indicating very low volatility compared to the broader market.

JPST’s POWR Ratings reflect this promising outlook. The ETF’s overall A rating equates to Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

JPST has an A for Trade, Buy & Hold, and Peer grade. Of the 32 ETFs in the A-rated Ultra-Short Term Bonds group, it is ranked #3. Click here to access JPST’s POWR Ratings.

ETF to Avoid:

ARK Innovation ETF (ARKK)

ARKK is the flagship actively managed fund from the team at ARK Invest, Cathie Wood’s advisory firm. It primarily profits from artificial intelligence, DNA technologies, energy innovation, automation, financial technology, and cloud computing industries.

With $6.00 billion in AUM, ARKK’s top holdings include Zoom Video Communications, Inc. Class A (ZM) with a 9.58% weighting, followed by Exact Sciences Corporation (EXAS) at 8.59%, Tesla, Inc. (TSLA) at 6.55%, and Roku, Inc. Class A (ROKU) at 6.25%. The ETF has 31 holdings in total.

The fund’s expense ratio of 0.75% compares to the category average of 0.51%. Its fund outflows came in at a negative $163.46 million over the past six months. The fund’s NAV was $30.47 as of January 3, 2023.

ARKK has declined 66.6% over the past year to close the last trading session at $30.46. It has a beta of 1.58.

Its grim outlook is reflected in its POWR Ratings. ARKK has an overall F rating, equating to a Strong Sell in our proprietary rating system.

It has an F grade for Trade and Buy & Hold and a D for Peer. It is ranked #75 out of 118 ETFs in the D-rated Technology Equities ETFs group. To access all ARKK ratings, click here.

JPST shares were trading at $50.14 per share on Wednesday morning, up $0.02 (+0.04%). Year-to-date, JPST has gained 0.02%, versus a 0.61% rise in the benchmark S&P 500 index during the same period.

About the Author: Kritika Sarmah

Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities. More...

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